Being Underwater Doesn’t Have to Spell Doom.
For many people, when they purchase their home, they are not usually thinking about a time when they might decide to sell it. Sometime in the future, maybe they will have children and need to buy a bigger home – or maybe they get a job in a different state and need to relocate completely.
Usually when they want to sell their home, it’s fairly straightforward – but what if they were upside down?
An Upside-Down Mortgage
If you were regularly paying off the mortgage and lowering the amount of money you owe to the bank, then you could be in a position to sell your home and break even or make a profit.
However, if the mortgage amount you owe is actually more than the value of your house, there could be a problem.
For example, imagine you have a $400,000 mortgage loan on your home. Then your circumstances change, and you need to sell your home, but you discover that if you sell it, the most a buyer would pay is $350,000.
This is called an ‘upside-down’ mortgage.
Being upside down would not be a problem if you didn’t plan to sell your home. But wait! What if you DO have to sell? What if you were forced to sell?
For many people, without a steady income, they would not be able to continue to make the mortgage payments. This is especially true when the main breadwinner dies. If you are the main breadwinner, and you die, how will your family continue to make those monthly mortgage payments?
If you answer “They can’t. They will have to sell our home,” and your house is upside down, then your family is in real trouble.
This is when many people’s homes go into foreclosure.
Foreclosure is a legal process where the lender attempts to recover the amount you owe them by forcing the sale of the house.
Often, when this happens, the family then has to consider filing for bankruptcy.
So, if this situation is common, and unforeseen tragedy’s do happen in life, what is the best way to plan for dealing with an upside-down mortgage and prevent your home from being taken away? One of the answers is: Mortgage Protection Insurance.
Mortgage Protection Insurance is a way to prevent hardship in times of loss and give you and your family the breathing room to make the financial decisions needed.
How Does Mortgage Protection Insurance Work?
If you die, a Mortgage Protection Insurance policy will provide your family with a lump sum payment of cash that they can use to protect their home from foreclosure and protect themselves from bankruptcy. Your family can use the money any way they think is best.
With Mortgage Protection Insurance, they can decide if they want to:
- Use the money to keep the home and continue to pay the monthly mortgage.
- Use the sum to pay off a portion of the mortgage and lower their monthly payments.
- Pay off the entire home loan.
- Or pay off enough of the mortgage so they can sell the home at its real worth.
By paying off a part of the mortgage to bring the loan amount down to what the home will actually sell for means you can finally get out of the upside-down situation.
Back to our original example: you have a $400,000 mortgage loan on your home, but the most a buyer would pay is $350,000. With Mortgage Protection Insurance, you could pay the bank the $50,000 difference. You would still owe $350,000, and now the home is no longer upside down. You owe $350,000, and you can sell it for $350,000.
By getting Mortgage Protection Insurance, you can give your family the time and breathing room they need to make the best choices themselves financially. That could mean simply continuing as they are in their home or selling the house and moving on.
- Mortgage Protection Insurance Questions and Answers: Everything You Wanted to Know
- Mortgage Protection Insurance Explained Simply
Asurea offers Life Insurance, Mortgage Protection Life Insurance, Medicare Supplements, Final Expense Insurance, Disability Insurance, Retirement Planning products and more. To find out more, click on the ‘Get A Quote’ button below. Want to have articles just like this delivered to your email? Just enter your email address below and click ‘Subscribe.’
This information is provided for general consumer educational purposes and is not intended to provide legal, tax or investment advice.